An Empirical Study of Pricing Strategies in an Online Market with High Frequency Price Information
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EllisonS1113.pdf
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Author(s)
Ellison, Sara Fisher
Snyder, Christopher M.
Date Issued
July 12, 2011
Publisher
Cambridge, MA: Department of Economics, Massachusetts Institute of Technology
Series/Report no.
Working paper (Massachusetts Institute of Technology, Department of Economics);11-13
Abstract
We study competition among a score of firms participating in an online market for a commodity-type memory module. Firms were able to adjust prices continuously; prices determined how the firms were ranked and listed (lowest price listed first), with better ranks contributing to firms’ sales. Using a year’s worth of hourly data, we document the pricing dynamics, cycles, and other patterns in this market. We then characterize empirically the factors which drive price changes, noting clear evidence of firm heterogeneity in the choice of pricing strategy. Finally, we develop a framework for simulating counterfactual market settings, using the simulations to examine counterfactuals involving different mixes of firms according to pricing strategies.
Subjects
ecommerce
pricing
strategy
repeated games
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